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Implementing California’s Global Warming Act

In 2006 California’s legislature passed AB32, the “Global Warming Solutions Act,” a measure that was touted as a trailblazing breakthrough in the dire challenge to avoid catastrophic climate change. Enthusiastically signed by Republican Governor Schwarzenegger, with “early action” measures diligently enforced by Attorney General Jerry Brown, praised by climate crusader Al Gore, this legislation became the model for the world to follow. But the devil is in the details.

In the Spring of 2007 California’s Air Resources Board (CARB) got to work on an implementation plan, in order to fulfill the legislative mandate to have AB32 fully enforced by 2012. Three years later, after countless public hearings, meetings with industry leaders, and endless legal, economic, and scientific analysis, CARB has a lot to show for their effort. CARB has produced so much material, in fact, that it is impossible to briefly summarize the myriad regulations that AB32 has already spawned. Implementation of AB32 will dramatically impact pretty much every aspect of human activity.

The premise behind AB32 is that CO2 is a dangerous pollutant, and that virtually eliminating CO2 emissions is necessary to prevent the planet’s climate from overheating, with all the apocalyptic consequences; rising oceans inundating coastal regions, epic droughts cascading through the world’s fragile forests and killing them, extreme storms, acidic oceans, collapsing agriculture – the end of life as we know it.

If you accept this premise, than the goals AB32 sets forth are perfectly reasonable – they call for a reduction of California’s total CO2 emissions caused by human activity, currently estimated at about 500 million metric tons per year, to be brought down by 2020 to the level they were in 1990, which was about 425 million metric tons per year.

To get an idea of what regulations CARB intends to enact, one may review online copies of their most recent “Climate Change Scoping Plan,” their “Updated Economic Analysis of California’s Climate Change Scoping Plan,” and their “ENERGY 2020 Model Inputs and Assumptions.” From these documents it is possible to put together the broad assumptions that underlie CARB’s ambitious plans for California. The key variables include current and projected figures for CO2 emissions, population, GDP, and total energy consumption in BTUs. If you compare the ratios between these variables, you will grasp the audacious impracticality of AB32, and by extension, of the entire agenda of the global climate alarm community.

As of 2010 California has a population of 39.3 million people, with a GDP of $1.6 trillion per year, and total energy consumption of 7.2 quadrillion BTUs per year. By comparing GDP with total energy consumption, California’s “energy intensity” can be calculated, that is, the amount of BTU units of energy required to produce $1.00 of GDP. In California’s case today, 4,644 BTUs equate to $1.00 of GDP, which is among the best in the world. The United States, for example, has energy intensity of 6,998. India’s energy intensity is 14,221, China’s is 15,512, and Russia’s is a staggering 24,212. This means the Chinese, for example, uses more than triple the energy used by Californians to produce the same unit of wealth. At the other extreme, only four major nations have energy intensities that narrowly edge California’s; Germany with 4,522, Japan with 4,513, the United Kingdom with 4,460, and nuclear-powered France the leader at 4,343. California is already a world leader in energy efficiency, which means it is going to be very expensive to realize additional energy efficiencies. We have already picked the low hanging fruit. We are already an example to the world.

With all this in mind, where does CARB envision California to be in 2020 with respect to these variables? In the mildest case, CARB estimates California’s total energy consumption between now and 2020 to drop by 6.4%, to 7.0 quadrillion BTUs per year. At the same time, California’s population is projected to grow to 44.1 million, and GDP to grow to $2.0 trillion per year. Under this scenario, California’s energy intensity will improve dramatically, dropping to a mere 3,450 BTUs per $1.00 of GDP. Is this practical? Can California produce a unit of wealth while consuming half as much energy as the rest of the United States?

There is only one way, ultimately, to accomplish this goal, and that is through policies that will make energy cost more. Here is where the other shoe drops – because not only is CARB designing policies to reduce California’s total energy consumption, but they are doing this to finance their core mission, which is to reduce the “carbon intensity” of California’s energy mix.

The definition of carbon intensity is how many kilograms of CO2 emissions correspond to $1.00 of GDP, and by this measure, California also scores quite well, requiring only .34 kg per $1.00 of GDP. The United States has a carbon intensity of .40, and only France is significantly ahead of California, with a carbon intensity of .15. CARB intends to reduce California’s carbon intensity by nearly 40% by 2020, from .34 to .21 kg/$1.00 GDP. Put another way, they intend to engineer a reduction to California’s projected 2020 “business as usual” CO2 emissions of 600 million metric tons per year by 30%, to the 1990 level of 425 million metric tons. They intend to do this is by empowering the state to auction “emission allowances” to every business whose operations in California are estimated to emit more than 25,000 tons of CO2 per year. This will affect nearly every major utility, refinery, agricultural operation, and manufacturer in the state.

By forcing industrial entities to purchase permits to emit progressively smaller quantities of CO2, these entities are inevitably forced to pass these costs on to consumers. CARB analysts are on record stating this should not be harmful to the economy because they intend to redistribute the proceeds of these auctions to anyone harmed by these price increases. There are several problems with this. First of all, there are going to be too many people at the table. Utilities, along with all the other major CO2 “polluters,” are going to be at the front of the line, along with the high-tech community, petitioning for subsidies to deploy low-carbon energy sources, or otherwise lower their carbon “footprint.” These would include wind generators and solar farms, along with the attendant extensions of transmission lines to reach these disbursed sources of energy. And because these sources of energy are intermittent, energy storage and backup generation infrastructure will also require new construction. It is important to emphasize that because of all this additional required investment – transmission, storage, and backup generators – no matter how inexpensive solar or wind energy becomes, it will never be as inexpensive as conventional energy today.

In order to sell the cost increases to consumers, who are already seeing utility rate increases of 30% or more as the utilities begin investing in the transition to low-carbon electricity, “smart meters” are going to be deployed at every residential, commercial or industrial account. These high-tech devices will comprehensively monitor energy consumption, eventually communicating with appliances that have embedded, IP addressable communication suites. They will enable the utility to “assist” the customer to micro-manage their energy consumption, providing “incentives” for the customers to upgrade their appliances and modify their lifestyle to consume less energy. In reality, this means people will have to use less overall energy, and consume energy at the approved times, or they will pay punitive rates – even higher than they will already be. It doesn’t take a lot of imagination to see where this is going: Install expensive and toxic compact fluorescent lighting, back-straining front-loading washers, double or triple paned, smaller windows, paint your roof white, down-size your television, add lighting systems that automatically turn off the lights if you left them on, enroll in programs to let experts from the utility into your home to help you with all this and more – or else.

Also in line for wealth redistribution will be the low income communities. If paying to deploy low-carbon electricity generation and transmission infrastructure, and attaching “smart meters” to everyone’s homes isn’t costly enough, consumers able to afford this will also see built into their inflated utility rates an assessment to help the less fortunate. Remember the incentives to the utilities, who in a competitive market would be trying to deliver cheaper services, are completely reversed in California – utilities are regulated businesses that have fixed, negotiated profit percentages. The only way they can make significantly more profit is by collecting more revenue. Without AB32, even in their wildest dreams, California’s regulated utilities would not have seen the possibility of doubling or even tripling their revenues within a decade. Similarly, without AB32, California’s high-tech “green” entrepreneurs and investors would have had to deliver green solutions the old fashioned way – by actually offering something better, faster, cheaper and cleaner – instead of short-cutting the process with legislated mandates and subsidies.

To reduce California’s carbon emissions by 18% in eight years will take more than just selling emissions allowances to industry and imposing smart meters in homes and businesses. AB32 enables new restrictions on land development in California, which already has the most draconian limitations on private property in the nation. In order to develop land, to allegedly reduce vehicle miles traveled, AB32 inspired regulations and legislation will require land development to occur in concentric circles around existing cities. It will place greenbelts around urban areas and require infill instead of expansion. There are a lot of good intentions here, but terrible unintended consequences. The artificial scarcity created by these restrictions, in a sparsely populated state with massive reserves of open space, has already created a housing market that was prohibitively expensive even before the real-estate bubble. Moreover, mandated infill often destroys the atmosphere of semi-rural suburbs, and greenbelts designed to prevent suburban sprawl generally only serve to create exurban sprawl, as developers simply relocate to beyond the greenbelt’s outer boundary.

Along with unprecedented encroachments on our property rights, and insidious intrusions into our privacy, the biggest problem with AB32 is the negative economic impact that it will have, in a state already crippled economically by existing environmental regulations. When one considers the financial costs required to lower CO2 emissions, it is specious to suggest that these costs are somehow offset because they create “green jobs.” When designing regulations for utilities, the job of government is to mandate reasonable environmental safeguards, but to balance that with an equally important mandate to deliver abundant, cheap energy and water.

According to this reasoning, instead of investing in a low carbon electricity infrastructure and surveillance systems to micro-manage energy consumption, California should be investing in nuclear power, nuclear powered desalination plants along the coast, liquid natural gas terminals, efficiency upgrades to existing high-voltage transmission lines, run-off harvesting and aquifer storage systems, upgraded aqueducts, comprehensive waste-water treatment and aquifer recharge, offshore drilling for oil and gas, widened roads and freeways, more airport runways, and buses for mass transit. These steps will result in energy, water and transportation costing everyone in California less. This will benefit businesses and consumers, and make California a magnet for investors and entrepreneurs all over the world. A recent study in Spain entitled “Lessons from the Spanish Renewables Bubble” calculated that for every green job created in Spain, because of higher costs of energy to industry, 2.2 jobs were lost. More specifically, with respect to electricity, they showed that every “green” megawatt of capacity cost 5.3 jobs elsewhere in the economy. The study concluded that these consequences were not unique to Spain’s approach but instead “are largely inherent in schemes to promote renewable energy sources.”

The trump card, of course, to negate all voices of reason, is the alleged threat of global warming. If you are an informed skeptic – something the alarmists contend is an oxymoron – it becomes tiresome to recite the litany of legitimate reasons we should stop, look and listen before going down this well-intentioned path to green hell. The primacy of solar cycles, the multi-decadal oscillations of ocean currents, the dubious role of water vapor as a positive feedback mechanism, the improbability of positive climate feedback in general, the uncertain role (and diversity) of aerosols, the poorly understood impact of land use changes, the failure of the ice caps to melt on schedule, the failure of climate models to account for an actual cooling of the troposphere, the fact that just the annual fluctuations in natural sources of CO2 emissions eclipse estimated human CO2 emissions by an order of magnitude. And let’s not forget – California only is responsible for 1.7% of global anthropogenic CO2 emissions. Does any of this matter to CARB?

Apparently not. If you read CARB’s scoping plan, it is instructive to read the final section “Vision for the Future.” The tentative targets they are setting for California’s CO2 emissions decline precipitously after 2020, to 284 mmt in 2030, to 185 mmt in 2040, and to 85 mmt in 2050. Returning to the notion of carbon intensity, these are mind-numbing objectives. Basically CARB is proposing to completely eliminate fossil fuel from California’s energy mix (barring “sequestration,” another major boondoggle) within the next forty years, and analysts at the agency openly admit they have no idea how they will accomplish this. But according to the climate alarmists, this is the only way to go if we hope to survive. Will California travel this road all alone?